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E-Commerce Drives Industrial Demand, Price Appreciation at Surprising Magnitude
Research by Green Street Advisors shows industrial real estate values have appreciated by 18% in the past two years. The Newport Beach, CA-based research firm’s Commercial Property Price Index revealed the surprising magnitude of increased demand from e-commerce.
Green Street analyst Eric Frankel says demand increases from e-commerce remains in the neighborhood of 30 to 40%. The amount of warehouse space required to deliver goods via e-commerce is a lot greater than standard brick-and-mortar. A review of Amazon and Walmart’s operations reveals that e-commerce sales require at least 2.25x more distribution space than brick-and-mortar retail.
The strong pace of market rent growth is expected to continue, though Green Street believes the healthy equilibrium that exists between development and demand will hold over the next several years. Frankel says, “demand has been so good that there has been no problem with supply being absorbed,” plus oversupply has been prevented since, “it is more difficult and costly to add new supply than it has ever been.”
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